NEW YORK, NY, September 27, 2012 -As the commercial insurance market has tightened for a number of key coverages, including global property and some primary and excess casualty lines, buyers have responded by adopting measures to stabilize their premiums. A current survey of risk managers and other corporate insurance buyers by Hanover Stone Partners finds firms have adjusted retentions, accepted restrictive policy wording, or changed insurers to hold their premiums steady. 

A copy of the survey results can be obtained at the following link: Survey Results

 

"In the current economy, pressures to stay within budget and keep costs from rising are certainly driving decisions of many risk managers and corporate insurance buyers," said John J. Kelly, managing partner, Hanover Stone Partners. "Unfortunately, if the insurance market continues to tighten for some critical coverage lines, buyers will face fewer options for maintaining their level of protection and holding the line on costs. Ultimately, they may have to take on more risk, accept higher premiums, or both."

 

The survey, which was conducted during the summer, was based on responses from more than 10% of the Fortune 500 who renewed their insurance policies during the second quarter through July 1, 2012. Survey participants were spread among 15 industry sectors and more than one-third were from businesses with more than $10 billion in annual revenue.

 

Among the casualty insurance lines, half the buyers were able to renew general liability policies at reduced or flat premiums, 45 percent saw premiums rise by up to 5 percent and 5 percent experienced increases of 6 - 10 percent or more. Nearly one in 10 (8 percent) accepted more restrictive coverage terms on their policy renewals.

 

In auto liability coverage, 75 percent of the survey participants saw rate increases, ranging from 6 percent to greater than 15 percent. For this coverage line, half the buyers changed their policy retentions or deductibles and half changed insurers.

 

Half the survey participants reported their workers' compensation insurers sought higher retentions or deductibles and the same percentage of participants made such adjustments to their programs. Meanwhile, nearly one in four (23 percent) had flat renewals, 30 percent had premium decreases, and 47 percent saw their premiums rise.

 

In umbrella and excess liability, 75 percent of the participants indicated their insurers sought to impose more restrictive coverage terms on their policy renewals. While 50 percent of the buyers agreed to the more restrictive terms, an equal percentage opted to change insurers.

 

Half the buyers indicated their insurers sought higher retentions or deductibles on their excess workers' compensation renewals, and the same percentage agreed to adjust their renewal programs, accordingly.   At the same time, half the buyers experienced premium increases and half had reductions in their premium.

 

With respect to property insurance coverages, 61 percent of the participants reported their insurers were willing to renew all-risk primary layers "as expired," while 22 percent sought to impose more restrictive terms and 17 percent sought both more restrictive terms and higher retentions. While one in five buyers agreed to the more restrictive terms, 15 percent changed insurers. More than half the buyers saw premiums rise on renewals with one in 10 experiencing increases of more than 15 percent.

 

It was a different story in the all-risk excess layers, where despite premium the fact that three in four buyers reported premium increases, ranging from 1 percent to 10 percent, none reported making any structural changes to their programs.

 

An overwhelming majority of buyers (80 percent) saw their global property premiums increase by as much as 10 percent, while one in five experienced a decrease of 1 percent to 5 percent. Among buyers, 30 percent indicated these insurers sought to impose higher retentions or deductibles on renewals, 10 percent sought more restrictive coverage terms, and 30 percent sought both higher retentions/deductibles and more restrictive terms. In response, one in 10 buyers changed insurers, 40 percent increased their retetions or deductibles and 10 percent accepted the more restrictive terms.

 

According to the survey, other property lines, including DIC, boiler and machinery and unbundled engineering predominantly renewed as "per expiring."

 

Among the executive risk lines, which include directors and officers liability, crime insurance, and fiduciary liability, crime insurance reportedly saw the most significant variation on renewal. Notably, half the buyers indicated insurers sought higher retentions or deductibles on their renewals. Interestingly, all buyers reported changing the deductibles or retentions of their crime policies.   Half saw premium increases and half experienced decreases.